Northland Power - Canadian renewable projects around the world

Divinesia · January 28, 2025, 4:33pm

Time to open a thread for this 4.5 billion CAD (approx. 3 billion euros) project. The hype for renewables has died down, which is usually a good sign to investigate what might be beneath the surface.

“Northland Power develops, builds, and operates sustainable infrastructure assets across a diversified mix of clean and green technologies, including wind (offshore and onshore), solar, and energy delivery through regulated utility. Offshore wind is expected to remain the company’s largest segment over the long term. Northland’s growth opportunities are global, spanning North America, Europe, Latin America, and Asia.”

Northland Power is an interesting case because projects that have been long in preparation are nearing completion in the coming years, and this should be reflected in the cash flow.

Northland Power just welcomed a new CEO, Christine Healy. Consequently, the next earnings report will be even more interesting to hear what the new CEO brings to the company and what her views are.

NPI is now valued at its lowest level in ten years. Unless dividend payments are cut, at current valuations, NPI would offer an annual dividend of up to 7%, paid 12 times a year, i.e., monthly.

There’s plenty of project diversification, and surprisingly few of them are in the USA so far. This is probably mostly positive due to the Trump risk.

Financing for the projects has largely been negotiated.

Projects are completing well this year and in the coming years, which should be reflected in the cash flow.

Latest earnings report (Q3 2024), the next (Q4 2024) report will be on February 26, 2025.

Now, let’s just wonder and wait for the earnings report.

Divinesia · February 1, 2025, 6:55am

Seeking Alpha also had an article a few days ago (you can read it for free in incognito mode). Amusingly, the same images were included, but there was a neat summary of the management.

SA predicts a 10% annual return at the current valuation (of which dividends would bring 7%), so in practice, they expect the share price to remain at its current level for the coming years.

However, when major projects are completed over the next three years, the valuation would sound quite modest. NPI’s valuation is currently burdened by many aspects: the uncertainty brought by the new CEO, the general (downward) valuation of renewable energy companies, as well as Canada’s own internal political problems and the whims of neighboring President Trump on top of that.

https://seekingalpha.com/article/4753257-northland-power-preferreds-outperform-but-commons-7-percent-monthly-yield-looks-interesting

And the Canadian dollar isn’t doing too well either.

Sijoittaja-alokas · February 2, 2025, 12:01pm

Good initial posts, I’m asking silly questions and not questioning anything, but I want to understand better, as my reading comprehension and understanding are not the best possible.

Why is the stock’s valuation so low? Is it simply because of those risks you mentioned well in your messages, e.g., the valuation of renewable energy companies has seen a decline due to various familiar reasons, etc.

Do you see a significant chance in the company that the potential risks mentioned or the failure of projects could collapse the share price from its current level? Or do you feel that too much unnecessary pessimism has been priced into the company’s stock?

Divinesia · February 2, 2025, 12:26pm

Good questions, which will surely be answered in the upcoming earnings report (26.2.). A more significant earnings report than usual, as the new CEO is at the helm for the first time.

No dramatic news has come from Northland in the meantime, so the drop seems to have come more from elsewhere than from Northland’s business operations. On the contrary, there have been videos and posts on LinkedIn showing good buzz from construction sites.

The entire renewables sector has been under considerable pressure again with the Trump saga (and before that, due to poor results from solar panel and wind turbine manufacturers).

My view is that Northland has gone with the flow, even though there’s no reason for it.

Northland itself does not manufacture solar panels or anything else; rather, it designs, builds, and operates massive energy projects around the world. Sometimes it also sells them off, depending on its strategy. Therefore, penalizing Northland for example, due to the distress of Western solar panel manufacturers, seems somewhat foolish. Northland should primarily benefit from cheaper materials. Northland’s balance sheet is also in good shape.
US tariffs should not directly affect Northland in any way, as it does not actually export any product from Canada to the US. The interim CEO already speculated about this before Trump’s victory, but the markets don’t seem to believe or have heard it. The new CEO will hopefully provide further assurance on this. Northland’s earnings report is not until 26.2., however, so fears and news about a Canada-US trade war could very well drive the stock down further before then.
The weak Canadian dollar is a question mark. I assume contract pricing has occurred in US dollars, and with luck, a poor CAD exchange rate might even help in some cases, but hopefully, more visibility on this will be provided in the next earnings report.
In the last earnings report, projects were happily stated to be on schedule and within budget. No news since then has indicated delays or problems.

… but project delays/cost overruns are still one of the biggest risks. However, projects to be completed within the next three years are permitted/financed and construction has progressed, so I can’t think of any reason to fear that more, at least before the earnings report.

Since a couple of larger projects are located in Poland and Taiwan, potential aggressions from China and Russia must certainly be considered a risk. Should potential US aggression towards Canada also be included in this?

Northland’s website conveniently shows how globally Northland’s projects are distributed (both completed and under construction, and how few of them are ultimately located in the US):

Divinesia · February 8, 2025, 6:48am

Construction of Poland’s massive offshore wind farm has begun. Electricity production is expected to start as early as next year.

Baltic Power is expected to generate about 4,000 GWh of carbon-free electricity annually, powering about 1.5 million households.

The venture, valued at €4.73 billion, represents a major step in Poland’s shift to renewable energy sources, with the aim of phasing out traditional energy production.

The partnership between Orlen and Northland Power highlights the use of local suppliers over the 30-year life of the wind farm. This commitment to local suppliers underscores the broader economic impact of the project in Poland.

https://www.marketscreener.com/quote/stock/NORTHLAND-POWER-INC-1411045/news/Poland-builds-first-offshore-wind-farm-in-Baltic-Sea-48998020/

Divinesia · February 27, 2025, 6:43am

Q4 and 2024 figures were released last night, the call is only today. Q4, however, met expectations, and three major projects are progressing on budget and on schedule. The share price will probably recover eventually, and it already rose from 17 to 19 before the earnings report. The dividend remains at 1.20 CAD / share (about 6% right now).

And those three projects will give a significant boost from 2027 onwards:

Once the projects under construction, including Hai Long, Baltic Power, and Oneida battery storage, are fully completed, they are collectively expected to deliver on a five-year annual average basis, approximately $570 million to $615 million of Adjusted EBITDA and $185 million to $210 million of Adjusted Free Cash Flow by 2027.

2024 adj. Ebitda: 1,261,951
2024 adj. free cash flow: 394,420

So these three projects alone would increase the figures by 45-50% from 2027 onwards.

Delivered strong operating results achieving the high end of 2024 financial guidance.
Completed the 23 MW upgrade of the Thorold natural gas facility on time and on budget.
Positioned for growth with a robust balance sheet and available liquidity of $1.1 billion.
Issued 2025 financial guidance with Adjusted EBITDA expected to increase to $1.3 to $1.4 billion, and Adjusted Free Cash Flow and Free Cash Flow expected to be $1.30 to $1.50 and $1.10 to $1.30 per share, respectively.
Announced a change in the Dividend Reinvestment Plan (“DRIP”) by eliminating the discount to 0% (previously 3%). The DRIP will be sourced on the market by purchasing shares instead of treasury issuances.

2025 Financial Outlook

2025 is a year of delivering key milestones on three large construction projects: Baltic Power, Hai Long and Oneida. Cash generation from some of these projects will be a significant milestone for Northland and is expected to start contributing to Northland’s earnings in 2025, continuing through 2026, with full realization in 2027.

Northland anticipates generating pre-completion revenue from Hai Long in the second half of this year. However, this cash flow is used to fund the construction of the Hai Long project and will not be included in Adjusted Free Cash Flow or Free Cash Flow metrics until the project reaches commercial operations, expected in 2027. Additionally, Northland incurs development expenditures in pursuit of its 10 GW development pipeline. These expenditures will reduce near-term Free Cash Flow until the projects achieve commercial operations but are expected to deliver accretive long-term growth in earnings and cash flow in future years.